Cities Settle Tax Dispute — Burlington International Airport

The city councils of both South Burlington and Burlington have approved a settlement agreement that draws to a close a dispute over property taxes paid to the City of South Burlington by the City of Burlington for the Burlington International Airport (BIA) property. This ends an approximately 5 year dispute between the two communities over the assessment of the BIA property that ultimately landed in Vermont Superior Court. The Councils took this action almost simultaneously at regular meetings held the evening of August 15th.

“This was an enormously complex property tax case that involved a variety of land uses and narrowly written statutes that apply to airports and property owned by one community but located in another,” said Helen Riehle, Chair of the South Burlington City Council. “I want to express my appreciation to the staff and attorneys of both Cities, who worked tirelessly to arrive at this negotiated settlement and to Councilor Meaghan Emery who attended the mediation sessions on behalf of the Council.”

“This settlement is good for the traveling public and good for the airport,” said Mayor Miro Weinberger. “It represents another important step in our multi-year effort to restore financial stability to the Burlington International Airport, and will allow the airport to continue making progress on the financial metrics that led to BTV’s credit rating upgrade in December 2014 without putting new price pressures on air travelers or the airlines. The City of Burlington appreciates South Burlington’s collaboration in reaching this settlement and its partnership on a wide range of important community issues.”

“Burlington International Airport is pleased with the agreement reached between the City of Burlington and the City of South Burlington,” said BTV Aviation Director Gene Richards. “Importantly, the settlement establishes a clear methodology for future assessments that should help avoid tax disputes between the airport and South Burlington. This agreement recognizes the important interrelationship between the Airport and the City of South Burlington, and with this issue resolved allows all parties to focus on ways to mutually support the economic growth of the region.”

The City of Burlington owns the land and buildings that make-up Burlington International Airport, which is actually located in the City of South Burlington. The total area of the airport is a little over 870 acres and includes properties both inside and outside of the formal boundaries of BIA as well as the so-called Noise Compatibility Program properties in the Chamberlin neighborhood of South Burlington.

The dispute over the valuation of these properties began in 2012. The City of Burlington filed appeals each subsequent year through 2016. Those ultimately made their way to the Vermont Superior Court.

In March 2016, the Court issued a decision that clarified how specific property tax statutes apply to various elements of the Airport property. Following a subsequent day-long mediation session the two municipalities have agreed on a settlement with the following key terms.

  • Beginning in tax year 2015-16, the total assessed value of Airport land and buildings will be approximately $52 million and by statute this assessed value will be in effect for 2016-17 and 2017-18. This is a reduction from the current assessment of $77 million.
  • This valuation is based in part on Airport land being valued at $25,750 per acre, and residential land acquired for noise compatibility purposes at $280,000 per acre. Commercial private use leased space within the Airport property will have an assessed value of $6.214 Million, and the land and buildings outside the perimeter fence will have an aggregate assessed value of $3.295 million.
  • Based on the Superior Court’s decision, Burlington will pay property taxes on some Airport land and improvements and a payment in lieu of taxes (“PILOT”) on other Airport land.
  • For 2015-16, the City of Burlington will be billed a total of approximately $717,000 combined property taxes and PILOT, from which municipal revenue to South Burlington will be approximately $238,000 and the remainder will be statewide education property taxes payable to the State of Vermont. In following years, the amounts payable both as PILOT and property taxes will be based on (i) the land owned by Burlington in each category, (ii) the values per acre referenced above, and (iii) the effective tax rates.
  • This $717,000 total represents a reduction of $838,163 from the pre-settlement total payment of $1,555,163.
  • Burlington will receive a credit on its municipal property taxes in 2016-17 and 2017-18 of approximately $59,000 each year in recognition of dismissing its 2015-16 over-payment claims.
  • Based on authority in the South Burlington City Charter and a special statute concerning municipally-owned airport property, South Burlington and Burlington have reached an agreement on property taxes for the 10-year period 2018-19 through 2027-28 with the following key terms:
    • The $52 million base value will continue for Airport property, with adjustments made based on acquisitions or other changes in the real estate inventory of the Airport, including certain changes of use of buildings.
    • Taxes and PILOT payments will continue, with the assessed taxes and PILOT based on effective tax rates over the 10-year period.
    • If statewide education property taxes are greater than the parties intend, South Burlington will extend additional credits in the future if certain conditions are met.
    • The parties agree to work together over the period of the agreement to achieve the intended benefits of the arrangement.

UPDATE:  On August 23, 2016 Vermont Superior Court Judge Helen M. Toor signed the judgement order, which puts to rest appeals and puts into place 3 years of an agreement between the two cities.  See the order.

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